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Entry and Exit in the Nonprofit Sector

  • Teresa D. Harrison und Christopher A Laincz
Veröffentlicht/Copyright: 21. Juli 2008
The B.E. Journal of Economic Analysis & Policy
Aus der Zeitschrift The B.E. Journal of Economic Analysis & Policy Band 8 Heft 1

Abstract

We study the entry and exit dynamics of nonprofit public charities using 1989-2003 tax return data. The observed patterns can be understood using a dynamic industry model based on Jovanovic (1982) that incorporates profit-deviation and a non-redistribution constraint. Both features generate a high exit threshold which implies high net entry rates and low exit rates. The data reveal that nonprofit gross entry rates are lower than those of for-profits in services, while extremely low exit rates (across both sectors and time) result in net entry rates nearly 3 times larger than that of for-profit firms. We find that the behavior of new public charities is remarkably similar to that found in studies of private firms (e.g. new firms begin smaller than the industry mean, but grow faster). However, exit patterns diverge sharply. Besides relatively low exit rates, the survival rate of new nonprofit firms greatly exceeds those found in studies on services and manufacturing. In addition we find that the hazard rate of exit declines with age and size, and with size conditional on age.

Keywords: nonprofits; entry; exit; dynamics
Published Online: 2008-7-21

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

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https://doi.org/10.2202/1935-1682.1937
Schlagwörter für diesen Artikel
nonprofits; entry; exit; dynamics

Artikel in diesem Heft

  1. Frontiers Article
  2. The Causal Effect of Studying on Academic Performance
  3. The Market: Catalyst for Rationality and Filter of Irrationality
  4. Advances Article
  5. Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs
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  15. A Representation Index: Measuring the Representation of Minorities in the Income Distribution
  16. Starting School at Four: The Effect of Universal Pre-Kindergarten on Children's Academic Achievement
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  19. Millers, Commission Agents and Collusion in Grain Markets: Evidence from Basmati Auctions in North India
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  26. Entry and Exit in the Nonprofit Sector
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